Shares in PSA Group, which owns Peugeot, jumped more than 5pc on speculation of a tie-up, with a spokesman for the French carmaker confirming that it was exploring a possible acquisition of GM’s UK and mainland European brands.

If the deal were to go through, the combination would have about 16pc of the European car market, overtaking Renault as Europe’s second-largest car business behind Volkswagen.

It also poses questions over the future of Vauxhall’s plants at Ellesmere Port and Luton, which together employ around 4,500 staff.

While GM declined to comment, in a letter to staff, the company said it would “seek to ensure any transaction would serve the best interests of all our respective important stakeholders”.

The Unite union said it had been given assurances last year from GM's leadership that its plants in the UK would have a safe future, but these seem to have been forgotten by executives in light of the Peugeot talks.

Len McCluskey, Unite general-secretary said: "To Peugeot I say, talk to us. Our members have helped to make the UK auto industry the most competitive and productive in Europe and will do so again with the right backing."

The union boss is due to meet Business Minister Greg Clark today to discuss any impact a merger would have on the UK plants, and the Department for Business, Energy and Industrial Strategy is understood to have been in contact with GM over the negotiations.

The Opel and Peugeot marques could move under the same roofCredit:
Reuters

Peugeot - which also controls the Citroen marque - is part-owned by the French government, which holds a 14pc stake after a state bail-out deal. This shareholding is matched by the Peugeot family and China’s Dongfeng Motor, both of whom hold 14pc.

GM and PSA already have a joint venture to produce new SUVs. This arrangement dates back to 2012, when GM took a 7pc stake in Peugeot as they formed an alliance in attempt to weather the then troubled European car market.

However, as Peugeot’s performance deteriorated, GM - which declared bankruptcy in 2009 as a result of the global financial crisis - sold off its holding for £250m in 2013.

GM’s European operations have proved problematic for the US car maker. Earlier this month the company reported strong overall results but a hoped-for return to profit from Vauxhall and Opel failed to materialise. GM has not made a profit in Europe for more than 15 years.

The company also predicted a $300m hit from Brexit-related losses for 2017, and said it had suffered a similar impact in 2016, mainly because of sterling’s drop in value against the dollar.